The ruling upheld the company's exploration approval despite the lack of a large environmental study.

Outside the court resident spokesman Justin Hamilton says it did noting to protect water supplies.

"You really need to be doing a full environmental impact statement, and understand what it is going to do cumulatively, before you start drilling though freshwater aquifers," he said.

Fullerton Cove resident Lindsay Clout says he is disappointed.

"We considered that the argument that we had was quite strong," he said.

"But, that's happened now, and we have to move on."

The O'Farrell Government last month approved plans for two-kilometre buffer zones around residential areas.

"There are a number of opportunities for us here now with the proposed legislation for the State Government and proposed changes from the Federal Government and we think that they will protect us very well," Mr Clout said.

He says there are 85 homes within a two-kilometre radius of the Fullerton Cove wells, with the nearest home just 400 metres away.

But Mr Hamilton expressed doubt that the buffer will do anything to protect water supplies if CSG extraction goes ahead in the area.

Dart Energy spokesman Andrew Collins says the company is pleased work can now get started in Fullerton Cove.

"Look, we're pleased with the decision today to immediately lift the injunction against the Fullerton Cove pilot project," he said.

"The injunction has prevented the company from drilling for quite some time.

"We're pleased that we got that decision today."

Mr Collins says despite the court win, there is no time frame on when they will begin drilling.

"We have to actually assess the recent announcement by the New South Wales Government before we proceed to go further with the project," he said.

"The project has been on hold for quite some time.

"The decision today justifies the hard work and the correct work we have done in producing our review of environmental factors."

In August last year locals spent nine days blockading the drill site until the police riot squad was called in.